By Foo Yun Chee and Ben Hirschler | BRUSSELS/LONDON



The first ever EU antitrust probe into excessive drug pricing is taking the European pharmaceuticals industry into uncharted territory, unnerving some companies and lawyers worried about the reach of market intervention.

It comes as drugmakers face global pressure over the high cost of prescription medicines, with particular anger focused on makers of older generic products who exploit limited competition to force through big price rises.

The European Commission’s move last month to investigate if Aspen Pharmacare made “unjustified” hikes of up to several hundred percent in the cost of five old cancer drugs puts the EU executive in the vanguard of such enforcement.

In the past, the Commission has acted on specific market abuses, such as agreements between manufacturers of branded drugs and generics firms to delay the entry of cheaper copies.

The latest broad charge of excessive pricing, also described by Brussels as “price gouging”, potentially sets a precedent for more direct action, especially if officials rely on a formula for what is a reasonable or justified profit margin.

“It’s a huge threat to the industry and companies should be watching this closely,” said Gianni De Stefano at law firm Hogan Lovells.

“Normally, in Europe, drug companies just have to negotiate with a national regulator on pricing. Now there is the prospect of additional European-level oversight and that is scary for the industry.”

South Africa-based Aspen, which says it is committed to fair and open competition, could be fined up to 10 percent of its global turnover, or some $290 million, if found guilty by EU antitrust regulators.

Adrian van den Hoven, director general of the Medicines for Europe industry group representing generic drugmakers, is worried about the implications of the EU probe, while stressing he in no way condones any anti-competitive behavior.

“The investigation may be needed to stop bad behavior,” he told Reuters. “However, this should not lead to a set of fixed principles that are not adapted to different situations, which then creates additional risks and which could increase the pressure on companies to withdraw important older medicines that patients need.”



EU law bans “unfair” prices, and the Aspen case follows controversy over U.S. market price hikes by the likes of Valeant and Turing Pharmaceuticals, previously headed by Martin Shkreli.

Shkreli, now on trial for fraud, was pilloried in 2015 for increasing the cost of an anti-parasitic medicine by more than 5,000 percent.

Maarten Meulenbelt, partner at law firm Sidley Austin, said the European Commission might be trying to fire a warning shot to make drug firms more cautious, rather than wanting to extend its remit into price regulation.

There certainly appear to be grounds for concern. A study by British academics in January found European prices for several off-patent cancer drugs had risen by more than 100 percent in the past five years.

National authorities have also been taking a more aggressive stance, with Italy’s competition authorities fining Aspen $5.5 million last year over its cancer drugs and British regulators imposing a record fine of $107 million on Pfizer for steep price increases for an old epilepsy medicine.

But Miguel de la Mano, a former European Commission competition economist who now works at consultancy Compass Lexecon, said price increases even of several multiples were not necessarily evidence of market abuse.

“The Commission should proceed with extreme caution,” he said.

The focus on excessive pricing comes at a time when there are also concerns about occasional shortages of some hospital drugs, due to production problems, unexpected spikes in demand and a limited number of suppliers.

The Aspen case centers on five drugs used in hospitals that are no longer protected by patents, which the firm originally acquired from GlaxoSmithKline.

Some lawyers believe the same principles could in future be applied to patented drugs, although Fiona Carlin, partner at Baker McKenzie, doubts the Aspen probe signals more intervention on innovative medicines, since officials will not want to take action that could undermine innovation incentives.

Any move to analyze a medicine’s price based on cost plus a margin would go against the grain of the industry’s drive to tie drug prices to clinical value – a key message for companies in the face of public disquiet about their marketing strategies.


(Editing by Adrian Croft)


Reuters source: